The Dragon Strikes Back: How China Could Hit Back at U.S. Tariffs

As U.S. tariffs on Chinese imports soar, some reaching up to 245%, Beijing is signaling it has the tools and the will to strike back.

China isn’t just the world’s second-largest economy; it also holds significant leverage over the U.S. economy. Chinese entities own at least $784 billion in U.S. federal debt and dominate the global supply of rare earth elements, critical for manufacturing everything from smartphones to electric vehicles.

“China is a bigger financial power than it looks like on the surface,” said Brad Setser of the Council on Foreign Relations.

Since the first trade war erupted in 2018, China has built out a regulatory arsenal, including export controls that could directly target major U.S. firms like Tesla and Apple. With West Coast ports already reporting a slowdown due to rising tariffs, businesses are bracing for deeper supply chain disruptions.

A recent analysis from the Peterson Institute found that the average U.S. tariff on Chinese goods has surged to 124.1%, while China’s tariffs on U.S. exports are even higher—around 147.6%. “With time, trade will go to zero,” Setser warned.

Despite escalating economic tensions, no formal trade talks have taken place between the two nations. The Trump administration continues to push for negotiations, while Beijing has called on the international community to resist what it describes as “unilateral bullying” from Washington.

“China is sending strong signals,” said Dewardric McNeal of Longview Global. “For them, it’s about survival.”

As trade barriers rise, the risks of economic retaliation are real, and the fallout could reshape global commerce.